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January 18, 2007
Are Board Members in HOAs Prohibited From Being Compensated?
I often get asked this question in various forms. May Board members in an HOA be compensated? Are they prohibited from being compensated? Should they be compensated for their time? Is there a law on this?
The first inquiry should be to governing documents for the Association as those generally control over the statutes with reqard to this question. Most HOA documents in California pose some kind of limitation on Board members receiving compensation other than for reimbursed expenses related to tasks performed for their board service. Such a clause is for the Board member's own protection. There is not a prohibition in the law - in California at least - that would prevent Directors in HOAs from getting paid for their services, but there are important protections that generally apply to Board Members found in the Davis Stirling Act (Civil Code Section 1367.9) and Corporations Code (Section 7231.5) that provide protection for volunteer board members acting in good faith. These are often referred to by attorneys as "safe harbor" statutes and provide protections that are lost once a "volunteer" board member becomes a paid employee, contractor or staff person, or paid board member. In the Civil Code, the protection is lost if a Board member owns more than 2 units in an association, because at that point they are seen as an "investor" in the eyes of the law, and not worthy of the protection volunteers get.
In my experience, the "pay" suggested often amounts to a mere stipend and is generally not comensurate with the risk that attaches for the Board Member's actions when the volunteer status is lost. But as the job becomes harder and harder, more board members are having to make considerable personal sacrifices and more Boards and potential Board members are asking about compensation.
If the question is whether a Board member can provide services for the association that are normally compensated (like painting or managing the association) and get compensation for them, watch for the next blog. There is a difference between getting paid for board member services and other services, and it is a delicate situation that needs special consideration.
It is entirely possible that the wave of the future might be paid Board Members for HOAs. If the volunteers do not take steps to educate themselves, the horror stories about shortage of funds and poor planning in HOAs that surface in the news will continue, and everyone will be looking for solutions. If paid Board Members = more expertise for financial planning and trustee duties, then so be it.
As for the education part - the State of California is not doing a very good job of it - so I suggest that you go to or send Board members to my website and start there - http://www.californiacondoguru.com.
Posted by Beth Grimm at January 18, 2007 1:17 PM